The COPE Report findings: we need to rethink the role of the State

By Ravi Ratnasabapathy

The last report from The Committee of Public Enterprises (COPE) released in 2016, highlights the government waste.  In this article we highlight some of the worst excesses.  

The Government is entrusted with billions of rupees of public funds, collected from the people. It has a duty to account for them and use them in accordance with the wishes of Parliament, without excess, extravagance or waste.  

Ensuring the money is properly used is the responsibility of Parliament which works through two  Committees, the Committee on Public Accounts (COPA) and the Committee on Public Enterprises. COPA scrutinises the Government, its Ministries, Departments, Provincial Councils and Local Authorities while COPE scrutinises public corporations and business undertakings.   

Summarised are some findings of the 1st COPE report. The COPE, by its own admission, is under-resourced. It lacks staff particularly for audit and legal support. They also lack IT systems and apparently, even a proper office.

Despite these limitations and the fact that the reports are not comprehensive-they have examined a limited number issues in a few institutions, they are a devastating critique on the state of governance. This is only the tip of a very large iceberg and underlines the need for a drastic re-think in the role of government.

A few highlights are presented below.     

The Committee on Public Enterprises

First Report
(For the period from 26th of January 2016 to 08th of April 2016)

Purchase and issue of substandard drugs

1. Imported pharmaceuticals not properly tested due to lack of lack of laboratory facilities. Drugs later found to be substandard are issued to patients owing to the delays in testing samples prior to the distribution of the same.

2. Drugs worth Rs250m had been identified for destruction in 2014 & 20 15but only Rs.214.6m were actually destroyed.

3. Substandard drugs worth Rs.199m purchased between 1996-2014 for sale through Osu Sala outlets.

4. Substandard drugs worth Rs.1bn purchased between 2011-14, the majority (Rs.867m) for distribution free through the public health system.

Ceylon Electricity Board

Lack of accountability 20 subsidiaries incorporated under the Companies Act  

The CEB holds a 63% stake in Lanka Transformers Ltd, which in turn has stakes ranging from 50%-100% in 15 of other companies. The CEB also has stakes of 50%-100% in 5 other companies.

1. LTL and its subsidiaries refused to submit details of operation to the COPE, despite the fact that the CEB effectively owns more than 50% of the shares. They claim to be private companies and need not report to parliament. The accounts of 14 were later submitted 16.3.2016

2. The subsidiary companies have paid dividends worth Rs.14bn to LTL. The CEB should have received 7.1bn as its share but only Rs.6.9bn was received.

Authors Note: LTL supplies services and products to the CEB. Values and terms of contracts are not known.

Payment of salaries and allowances outside standard procedures  

1. A sum of Rs. 849 million had been spent to pay 39 allowances of various types to employees without the approval of the Cabinet of Ministers of the Treasury.

2. Establishing a new salary scale known as “E – scale” for engineers with effect from 01st of January 2015 and making payments in accordance with that without the recommendations of the salaries and Cadre Commission.

Janatha Estate Development Board

1. Land leased at low rates

Land belong to the JEDB in Vauxhall street had been undervalued and given on long leases of 25,30 or 50 years upon  a cabinet decision.

    2. Unpaid EPF and ETF dues for the period 2011-2015 amounting to Rs.323m (including surcharges).

    3. Operations Loss of the JEDB

2011           2012          2013         2014
Rs.258m    Rs.199m   Rs.501m   Rs.169m

Land Reclamation Commission

1. Information with pertinence to the lands belonging to the Commission not been updated.

Action has not been taken to formulate a register of lands and to maintain it updated.

2. Special Projects for which lease agreements have not been signed

i. 280 acres of Monarakelewatta had been leased out to a private company under 30 year lease in February 2011 without any approval from the subject minister and Rs.1 million has been paid as advances but lease rent had not been recovered for the period from 2011-2016

ii. Out of 12 acres of the Kumbalgoda estate, 06 acres have been leased out to a private Export Crop Project in an illegitimate manner.

iii. Leasing out a plot of land with an extent of approximately 2 hectares of Arkediyawatta in Badulla District. The amount in arrears to be recovered is around one million and without the approval of the Council a loan of Rs.17.5 million has been obtained keeping this land as a security and no action been taken by the Council with pertinence to this matter.

iv. 06 acres of Industrial Zone, Leylandwatta, Homagama has been given to Rosell Bathware Ltd company under 50 year lease and lease rent not been properly recovered.

Elkaduwa Plantation Company LTD

1. Leasing out the Nellaolla estate

i. Leasing out an extent of 125hectares of the Nellaolla estate which consist of 358 hectares to Agri Squad company and the balance forcibly acquired by the residents of the area.

ii. A person as a sub lessee of the Agri Squad Company possessing the estate in an unauthorized manner.

2. Leasing out a factory owned by the company

Leasing out a factory owned by the company to the institution by the name of Pride Tea, the particular institution has completely defaulted paying lease rent to the company and also defaulting the payment due for tea leaves with a value of Rs.30 million provided by the company.

Board of the Sri Jayawardanapua Hospital

Payment of consultants fees

Note: Although this is a state hospital it also runs a paying ward. These payments of fees appear to be over and above the normal remuneration to staff.

1. 50% of the total income charged from the patients of the paying wards have been paid as professional fees to the doctors and staff of the hospital. PAYE tax has not been deducted on the payment. Unpaid PAYE tax for 2014 and 2015 amounted to Rs.74.7m

Purchase of anesthetic equipment

1. Four anaesthetic machines had been purchased at a cost of Rs. 29.9m without following a proper procurement process. The purchase of the equipment had apparently gone ahead despite an offer from the Australian Government to provide these free of charge.

2. The purchase of the equipment had been justified on the basis of three existing machines being defective. No technical evaluation of  is available to support this and no proper procedure was followed for disposal. The Committee was later informed that he disposed equipment had been  given to the Negombo, Kalutara and Monaragala hospitals.

Expired stock

Drugs and other worth Rs.5.1m had been purchased for the Neurosurgical Unit in February 2012.

80% of the stock valued at Rs.4.1m had not been used and expired.

National Secretariat for Elders

Deducting Rs. 100/- without the concurrence of the Ministry of Finance from the elders’ allowance of Rs 2,000 paid to elders as per a budget proposal

The budget for 2015 proposed a monthly payment of Rs.2000/- for elders over the age of 70. Ministry of Social Empowerment and Welfare, the relevant line ministry by way of circular No. 1/2016 has ordered that Rs.100/- be deducted from each payment and the money be retained at the secretariat to set up a welfare fund.

The money is being deducted in spite of the opposition of the management of the secretariat and without the approval of the Ministry of Finance

Note: The Secretariat has issued ID cards for 10,978 elders, although the plan had been to issue 40,000 cards. Assuming the monthly allowance of Rs.2000 was paid only to those registered the monthly payment would amount  to Rs21m and the amount retained for the ‘welfare fund’ would be Rs1m per month.

Bank of Ceylon

Continuous losses at the overseas branch in London. Although the branch in the Seychelles I snow profitable operations are high risk as 62% of the total deposits are owned by only 03 customers.